Intercontinental Exchange, CME Group Urge CFTC on Hyperliquid Risks

In brief

Intercontinental Exchange and CME Group are reportedly urging the CFTC to address market integrity risks associated with Hyperliquid.

The Hyperliquid Policy Center publicly dismissed the traditional exchanges’ concerns as baseless, pointing to the public nature of the platform’s transactions.

Amid energy market volatility, Hyperliquid has generated $21.51 billion in notional Brent crude perpetual futures trading volume.

The Hyperliquid Policy Center pushed back on Friday against concerns that have reportedly been raised by incumbent exchanges on Wall Street, arguing that the decentralized exchange, or DEX, is designed in a way that’s “hostile” to insider trading and price manipulation.

“Hyperliquid’s transparency serves as a strong deterrent for misconduct and facilitates surveillance, detection, and investigation by regulators and law enforcement,” the organization said in an X post, pointing to the public nature of transactions on the platform.

As Hyperliquid has become an increasingly popular venue for traders to speculate on commodities using derivatives, Intercontinental Exchange Inc—parent of the New York Stock Exchange—and CME Group have alerted regulators to potential risks, per Bloomberg.

The outlet reported, citing people familiar with the discussions, that the two companies have conveyed concerns to the CFTC regarding Hyperliquid’s pseudonymous trading environment—which could theoretically be used by insiders or sanctioned entities.

The DEX, which is based in Singapore, operates without native know-your-customer (KYC) requirements, while restricting users in the United States and Ontario, Canada. The format mirrors most applications in decentralized finance, or DeFi, such as Polymarket.

The concerns reportedly come as Hyperliquid has seen a sharp uptick in trading volume on perpetual futures tied to the price of oil since the United States and Israel attacked Iran roughly two and a half months ago—a conflict that continues to squeeze energy costs higher.

Because Hyperliquid is unregulated, ICE and CME reportedly fear that oil prices could be improperly swayed, compromising the integrity of market gauges that ultimately feed into the cost of goods and services associated with shipping and transportation.

The Hyperliquid Policy Center acknowledged in its X post that “U.S. law is not currently tailored for derivatives markets on public blockchains like Hyperliquid,” noting that it’s eager to continue working with policymakers in Washington on regulatory matters.

Formed in February, the organization was funded with $29 million worth of Hyperliquid’s native token, with the goal of serving as a legal resource for lawmakers. The Hyperliquid Policy Center bills itself as an independent advocacy and research organization for DeFi in the U.S.

Since conflict erupted in the Middle East, Hyperliquid has generated $21.51 billion worth of notional trading volume on perpetual futures tied to Brent crude, according to data platform Allium. Unlike traditional futures contracts that have a fixed expiry date, perpetual futures can be held indefinitely, as long as a trader maintains the proper margin requirements.

As of Friday, Brent crude perpetual futures on Hyperliquid comprised $306 million worth of outstanding contracts, or 3.4% of Hyperliquid’s open interest. Meanwhile, perpetual futures tied to the price of Bitcoin represented $2.2 billion in notional value, or 24% of open interest.